Blockchain on the government horizon

By Brian Robinson

Mar 22, 2016

Blockchain technology, which promises a radically new way of securely completing transactions between various parties, is starting to attract government’s attention after industry moves to build a base for future applications that use the technology.

MORE INFO

How blockchain works

A blockchain-based system marries ironclad trust to a fully auditable sequence of digital events enclosed in a highly secure environment. Read more.

Blockchain has the potential “to vastly reduce the cost and complexity of getting things done -- across industries, government agencies and social institutions,” IBM Vice President Jerry Cuomo said at a recent hearing of the House Subcommittee on Commerce, Manufacturing and Trade.

The hearing, on digital currencies such as Bitcoin that use blockchain, was a part of the subcommittee’s Disrupter Series of informational meetings on potentially revolutionary emergent technologies. Previous hearings have focused on the Internet of Things, drones, mobile payments and 3-D printing.

Rep. Michael C. Burgess (R-Texas), the subcommittee’s chairman, called blockchain an “incredible” cutting-edge technology that could help address the trust and security issues “that are a daily challenge for individuals and companies in every sector of the U.S. economy.”

Blockchain is still largely unknown to government, but some organizations have started to dip their toes in the water. The Department of Homeland Security, for example, published several Small Business Innovation Research solicitations in December asking for research ideas on using blockchain in identity management, cryptography and other applications.

In January, Vermont put out a report on the opportunities and risk of blockchain technology, describing it as something the state should consider for future use, while admitting that, “at present, the costs and challenges associated with the use of blockchain technology for Vermont’s public record keeping outweigh the identifiable benefits.”

Blockchain -- which in the Bitcoin application uses SHA-256 cryptography -- marries the peer-to-peer file sharing techniques found in such popular applications as BitTorrent with public key cryptography to provide for a distributed network of trust that can confirm transactions are valid and record them in a ledger.

Those records are immutable and can be updated only by a majority consensus of the entities involved. None of the historical information can be erased, establishing a rock-solid and auditable foundation for the transactions. With blockchain, the trust that is currently vested in a centralized authority -- an approach that is increasingly worrisome for security and privacy professionals -- also becomes more decentralized and reliant on the system itself rather than on the trust between the various parties involved in the transactions.

The secret sauce behind blockchain is evident in its title. In Bitcoin’s blockchain application, each block contains a full history of the transactions involved, and subsequent blocks in the chain carry that data forward, with each one containing a hash of the previous block. As the chain grows, it becomes computationally that much more difficult to interfere with. A chain is considered valid only if all the blocks and transactions in the chain remain valid, and only if the entire chain continues to starts with the first, genesis block.

Industry organizations, enthused by the promise of blockchain, are starting to coalesce around efforts to develop the technology further. In February this year, the Linux Foundation formally launched the HyperLedger Project, an open source collaboration that already includes code and technology contributions from major IT companies. Tech firms such as IBM, which is a member of the HyperLedger Project, have also announced their own blockchain programs.

Research institutions, meanwhile, are looking at expanding the kinds of applications that could use blockchain technology, beyond the transactional applications currently in use. The Massachusetts Institute of Technology, for example, has launched a prototyping program to develop what it’s calling Enigma, a decentralized computation platform that delivers end-to-end, guaranteed privacy without the need for a trusted third party.

The core problems MIT researchers are trying to solve are that, as currently designed, “blockchains cannot handle privacy at all and are not well-suited for heavy computations.” However, many of the most sensitive parts of modern applications require heavy processing on private data. The public nature of blockchains “means private data would flow through every full node on the blockchain, fully exposed.”

With Enigma, according to the MIT researchers, users could run computations on data without the need to access the raw data itself, thereby retaining the privacy requirements of that data.

Beyond Bitcoin, however, it’s still likely to be some years before we see blockchain implemented in other applications and uses. Cuomo admitted in his House subcommittee presentation that most blockchain implementations, and the tools surrounding them, simply aren’t ready yet for serious business users.

“The concept and architecture are taking form,” he said, “but some key capabilities and standards are missing or are only now emerging. For instance, many enterprise applications require more extensive security capabilities than most of today’s blockchain implementations offer. Within healthcare, more extensive privacy protections are needed.”

Nevertheless, Cuomo said, blockchain has a clear future in many wide-ranging government processes -- from collecting taxes and delivering Social Security benefits, to managing land registries and assuring the integrity of government records.

For that reason, he said, the best way forward is for industry, government and the business communities to consolidate their efforts around a single open source foundation -- the Linux HyperLedger Project -- that’s developed and governed in a cooperative and transparent way. And government, Cuomo said, should focus on helping set necessary standards, developing ideas for government blockchain applications and the writing appropriate regulations.